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Polar vortex freezes market The plunge in the sales-to-new listings ratio in January is a downside risk to our view that house prices will recover this year, particularly amid anecdotal evidence that US tariff threats are weighing on demand. Developers …
18th February 2025
Underlying inflation pressures too strong beneath the surface The GST holiday meant that headline inflation remained below the 2% target in January, but there is clear evidence that underlying inflation pressures are building. Given the tariff threat …
Bank of Canada navigating without tariff roadmap The Summary of Deliberations from the Bank of Canada’s January policy meeting confirmed that tariff uncertainty had a hand to play in its decision to cut interest rates by 25bp. In particular, members of …
14th February 2025
Manufacturing recovery falls flat The sharp decline in manufacturing sales volumes in December suggests that the earlier recovery in the sector has hit a wall. New orders rose only modestly, by 1.3%, confounding hopes that the sector might benefit from …
The newly-announced 25% tariffs on all steel and aluminum imports entering the US will have a limited impact on the Canadian economy given that exports of these products account for just 1% of GDP. With President Trump also beginning to change his tune on …
10th February 2025
The announcement and subsequent postponement of tariffs on Canada by President Donald Trump has sprung politicians into action. On Wednesday, Liberal Party leader hopefuls Mark Carney and Chrystia Freeland set out their economic policies. Today, Prime …
7th February 2025
Due to an error in the figures mentioned in the original, we are re-sending this Canada Economics rapid response. We apologise for any inconvenience caused. Strong across the board A further strong rise in employment and tick down in the unemployment rate …
The threat of US tariffs will hang over the economy for the foreseeable future, weighing on confidence and reducing investment. We have therefore revised down our GDP growth forecast for 2025 to 1.5%, from 1.8%. We still expect the Bank of Canada to cut …
6th February 2025
Strong end to 2024 but little reason for optimism in 2025 The surge in exports in December and recent improvement in the export order survey indicators add to the evidence that the economy was picking up momentum at the end of last year. The prospect of …
5th February 2025
Although President Trump has hit pause on tariffs on Canada, his communications suggest he still wants a broader agreement on various trade issues. Given the chaotic political situation in Canada, it seems unlikely that such an agreement can be made in …
4th February 2025
Trump hits Canada, China & Mexico with tariffs President Donald Trump’s decision to impose 25% tariffs on Canada and Mexico and an additional 10% tariff on China from this coming Tuesday, (with the only partial exemption for Canadian energy imports that …
2nd February 2025
Despite the best efforts of the Canadian government to convince US officials that the border is secure, President Trump reiterated on Thursday that his administration will impose a 25% tariff on imports from Canada this Saturday. That would be a big blow …
31st January 2025
Still struggling for momentum ahead of potential tariff hit The larger-than-expected decline in GDP in November and flash estimate of only a moderate rebound in December suggest that growth was 1.6% annualised last quarter, a little lower than we and the …
With the economy doing better recently, the Bank of Canada’s decision to cut by 25bp today might have been a closer call were it not for the looming threat of tariffs. Admittedly, the Bank hinted that it might have to refrain from providing more policy …
29th January 2025
Bank cuts by 25bp as 25% tariff threat hangs over the economy With the economy doing better recently, the Bank of Canada’s decision to cut by 25bp today might have been a much closer call were it not for the looming threat of US tariffs. Any tariffs could …
This Update answers some key questions about the likely implications of the US imposing 25% tariffs against Canada and Mexico. Our current forecasts are based on the assumption of a 10% universal tariff and hence growing speculation about more aggressive …
27th January 2025
An especially ‘Blue Monday’ for Canadians President Trump used his first week (back) in office to double down on threats to impose a 25% tariff on imports from Canada, with the added detail that this could come into effect on February 1 st . As we …
24th January 2025
Heading for another strong quarter On the surface, the 0.4% decline in retail sales volumes in November looks worrying, but that fall partly reflects households delaying purchases ahead of the December GST holiday. Encouragingly, November’s drop appears …
23rd January 2025
Recent upside surprises to activity and core inflation could justify a pause However, with tariffs hanging over the economy, Bank will opt for a 25bp cut Bank set to call time on QT this year The recent pick-up in GDP growth and core inflation pressures …
22nd January 2025
The “America First Trade Policy” White House memorandum makes it clear that tariffs are coming, although we still have little clarity on the timing. There are some signs that a universal tariff could come later than in the second quarter as we have …
21st January 2025
Concerning signs despite GST-related fall in headline inflation The small fall in headline inflation to 1.8% in December is not as encouraging as it looks, with the details suggesting that a higher proportion of the GST holiday was captured by the price …
The Bank of Canada’s latest business and consumer surveys support our view that GDP growth will pick-up this quarter and suggest there are some upside risks to our forecast for another 75bp of interest rate cuts this year. That said, given the threat of …
20th January 2025
The federal government is planning to fight US tariffs with tariffs, but reports this week suggest that those would cover a far smaller value of goods than the US is likely to hit. The government has also failed to muster enough support from the …
17th January 2025
The Shape of the Fractured World in 2025 The share of the fracturing global economy that is accounted for by China and its geopolitical allies contracted in 2024, leaving it under a third the size of the US bloc at the start of 2025. This fall was in part …
Higher bond yields a risk to fragile recovery The rise in house prices in December builds on November’s gain, providing some support to our view that house prices will rise by a healthy 4% this year. That said, with the sales-to-new listing ratio dropping …
16th January 2025
Manufacturing recovery stalls The rise in manufacturing sales in November was entirely due to higher prices, with sales volumes unchanged. While the recovery in activity took a breather, the 1.8% m/m rise in new orders and increase in the S&P Global …
15th January 2025
The power vacuum created by Prime Minister Justin Trudeau’s resignation comes at a bad time, with President-elect Donald Trump ratcheting up his threats against Canada, raising the risk that the next government will be parachuted onto the front lines of a …
10th January 2025
This page has been updated with additional analysis since first publication. Jump in employment raises chance of Bank pause The huge gain in employment in December supports our view that labour market conditions are strengthening, despite the recent …
US President-elect Donald Trump’s increasingly aggressive rhetoric against Canada suggests we should take his tariff threats seriously. We already assume that Trump includes Canada in a likely 10% universal import tariff, but we remain relatively sanguine …
9th January 2025
The Cold War was defined by geopolitical blocs – the Soviet or Eastern bloc against the Western bloc. Geopolitics retreated with the collapse of the Soviet Union. The period from the early-1990s to the early-2010s was instead an era of globalisation: most …
7th January 2025
Donald Trump’s second term could redraw the global geopolitical map. A sustainable “Grand Bargain” with China, warmer relations with Russia, or a breakdown in the relationship between the US and its traditional allies could each reshape supply chains and …
There are increasing signs that interest rate cuts are feeding through to the real economy. Household consumption grew strongly in the third quarter and activity in the housing market has picked up. We expect consumer spending to continue to support the …
Export volumes continue to recover The third consecutive rise in export volumes in November provides further evidence that the economy was gaining momentum at the end of last year. US tariffs could cause the recovery to go into reverse this year, but that …
Prime Minister Justin Trudeau’s resignation as Prime Minister and Liberal Party Leader sets off a contest for who will lead the party into the election due by October, but which could happen much sooner if the opposition parties manage to topple the …
6th January 2025
Green shoots emerging The stronger-than-expected increase in GDP in October and upward revisions to the prior two months leaves fourth-quarter growth on track to accelerate to 2% annualised, raising the chance of the Bank of Canada pausing at its next …
23rd December 2024
Frosty atmosphere at the top Forty years on from his father famously resigning as Prime Minister following a solo walk through an Ottawa snowstorm, reports suggest Justin Trudeau is mulling the same decision after a tumultuous week within government. The …
20th December 2024
Consumption losing momentum again Retail sales volumes were unchanged in October, bringing a run of strong consecutive monthly gains to an end. Moreover, the preliminary estimate that sales values were unchanged in November too suggests this may be the …
Overview – The near-term economic outlook has brightened, with lower interest rates feeding through and consumption benefitting from the recent strong pace of real income growth. That should help to drive quarterly GDP growth above 2% annualised in the …
18th December 2024
Underlying inflation pressures building despite downside headline surprise The surprise fall in headline inflation back below the 2.0% target in November reflected steep price falls in a handful of components related to consumer goods, driven by Black …
17th December 2024
The Fall Economic Statement (FES) showed a much larger budget deficit for the previous fiscal year than previously estimated, but that was largely due to one-off charges related to indigenous settlements. Compared to Budget 2024, the new net spending …
16th December 2024
Housing market heating up The rise in home sales in November builds on the jump in October and is particularly positive considering some buyers may have held off from purchases ahead of the new mortgage rules that took effect this month. Prices are set to …
Bank of Canada signals caution The Bank continued its easing cycle this week with another 50bp cut, taking the policy rate down to 3.25%. While that was widely expected, the hawkish tone of the policy statement prompted investors to pare back expectations …
13th December 2024
GDP growth picking up again The upside surprises to both manufacturing and wholesale sales in October supports our view that the near-term economic outlook is now better than the Bank of Canada seems to think. It looks likely that the preliminary estimate …
Although the Bank of Canada cut interest rates by another 50bp today, its communications were more hawkish than might have been expected, with the Bank no longer indicating that further cuts are guaranteed and instead saying it “will be evaluating the …
11th December 2024
50bp cut will not be repeated Although the Bank of Canada cut interest rates by another 50bp today, the accompanying communications were more hawkish than might have been expected, with the Bank no longer indicating that further cuts are guaranteed and …
While mortgage interest cost (MIC) inflation has historically turned negative during, or after, loosening cycles, we expect it to remain positive this time and rebound from 2026. This is because, in contrast to previous monetary policy cycles, the …
10th December 2024
Pick-up in the survey indicators Recent Bank of Canada communications have been keenly attuned to the downside risks to inflation and economic activity, concerns which seemed justified after last week’s disappointing GDP report, which showed third-quarter …
6th December 2024
Strong employment gain more important for the Bank than jump in unemployment rate We disagree with the market reaction to November's Labour Force Survey, implying that the jump in the unemployment rate makes a 50bp cut much more likely. A slowdown in …
Lower interest rates are yet to do much to spur the economy, but green shoots are emerging, with the timely activity surveys picking up and the newly-announced mini-fiscal stimulus expected to boost consumption over the coming months. That said, strong …
5th December 2024
GDP growth has disappointed, but outlook is brighter Core inflation has surprised to the upside of Bank’s forecasts Still a case for another 50bp move, but Governing Council likely to favour 25 bp Although the recent GDP data disappointed, there are green …
4th December 2024
